ABSTRA CT
This study examined the “Impact of Corruption on Fiscal Policy Management in Nigeria”. The major objective was to find out the extent to which corruption in the fiscal policy management affects Government expenditure patterns, deficit financing and tax revenue. Research hypotheses were raised and tested through the use of simple regression analysis. After the test of the hypotheses, it was discovered that corruption in the fiscal policy management, negatively and significantly, affected tax revenue in Nigeria. However it was found out that corruption positively affected government expenditure and deficit financing but was not significant. Based on the findings and conclusion, it was recommended that: The funds budgeted on expenditures of Government should be given a time for it to be spent and the balance returned to the Government treasury if any. Government supervisors should be given the time to evaluate the work to ensure that the money was spent within the time and according to purpose. Deficit financing should be used sparingly. Also, to reduce corruption on the tax revenue, flat rates should be given to one-man business, partnership and companies depending on where they are located, and if anybody has any complaint to make the person should meet tax assessors. Evidence of tax payment must be shown in both public and private schools upon admission of children into schools and tax must be paid straight through a bank into a government account. For further study, researchers can carry out research in Nigeria on “Corruption and the Composition of Government Expenditure” and “Corruption and the Budget; Problems and Solutions.”
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Corruption, in Fiscal Policy Management in Nigeria, can be traced back to the pre• independence period when Azikiwe was accused of flagrant abuse of office. He was accused of having considerable personal holding by the injection of two million pounds of public money into African Continental Bank (ACB). Little wonder, Eyo (1956) in Uche (1997 :57) suspected corruption when he moved a motion in the Eastern House of Assembly which requested that: an independent commission of enquiry be appointed forthwith to enquire into the circumstance surrounding the investment and/or deposit of public funds of the Eastern Region totaling nearly 2 million in June 1955 in the African Continental Bank Limited in which Azikiwe, the premier of the Eastern Region had an interest. However, this was not debated since a related legal case was still pending, whereas Standing Order of the Houses, Section 25 (3), forbade references to be made to any matter on which a judicial decision was pending in such a way as might, in the Speaker’s opinion, prejudice the interests of the parties. The House’s inability to debate the motion was interpreted differently by the Bank of England, with Loynes asserting that:
Dr Azikiwe managed to block Mr Eyo’s first motion by getting the Speaker (an African) to rule it out of order, Dr Azikiwe was then clever enough to bring an action for libel which is pending against Mr. Eyo and the Newspaper which published the latter’s accusations. This has given the Speaker firmer grounds for rejecting Mr Eyo’s further attempts to discuss the matter in the regional parliament.
However, when it was later discovered that it was true that he took the money, he transferred his personal interest to Eastern Region Government (Chuta 2004:21)
During the first republic (1960-1966), some political office holders were noted for undisguised personal enrichment. Some of the Ministers then did not pretend on how they made their ill-gotten gains. To prove the validity of the above statement, column
609 of Federal House of Representative Debates (1965) states that during a parliamentary debate, when the Minister of Aviation and Federal Representative then was asked how he got the money which he used to build his stone mansion in his hometown, he answered that he got money from known and unknown sources. In order to answer a charge that governm ent officers were collecting and accumulating wealth anyhow, the then-Minister of Finance answered that to those who have, more shall be given. This kind of utterances is considered corrupt and should not come out of the mouth of a political office holder that is serving the people.
Besides, during the a certain civilian regime, the sum of W200 million supplementary allocations to a state governm ent meant for the payment of salary arrears disappeared. This money got lost like that on the grounds that it was as a result of change of hands. Chuta (2004:27) lends credence to this where he says that corru ption had become so pervasive, and may have been given official recognition to the extent that the disappearance of the sum of N200 million as supplementary allocation to a state governm ent, for the payment of overdue salaries was dismissed simply as owing to “change of hands”.
Corru ption in the fiscal policy management/fiscal operations in Nigeria continued during the military regime. A president embezzled public funds for private use so much so that when he died, the governm ent of the day had to appropriate all the ill• gotten funds and property that belonged to the president. This is buttressed in Chuta’s (2004:33) expression that corruption had a free rein in Abacha’s governm ent, and General Abacha himself became an epitome of corru ption in Nigeria. He adds that a decree was signed on May 24, 1994 by General Abdulsalami Abubakar, Abacha’s successor which enabled the governm ent to appropriate the ill-gotten funds and property belonging to Abacha himself, as well as those of his cronies.
Also, it was reported in a newspaper as pointed out by Chuta (2004: 36) that the sum of N650 million was squandered on fifty-three contracts. Out of the fifty-three contracts, only eight were regularly awarded, and none of the befitting contractors were registered as required by financial regulations.
Ogundoyin (2005 :2) reported that Ribadu said that 40% of Nigeria’s $20 billion oil income is swallowed up in corru ption. Achebe (1983:52) adds that knowledgeable observers have estimated that as much as 60 percent of the wealth of this nation is regularly consumed by corru ption.
Imohe (2005:3) outlined Notable high profile casualties of Nigeria’s An ti-corru ption war:
• Former Senate President Adolphus WABARA
• Former Education Minister Fabin OSUJI
• Former IGP Tafa Balogun
• Bayelsa State Governor ALAMEISEIGHA .
Ogundoyin (2005: 1) writes that Transparency International, the global anticorruption watchdog has for instance consistently ranked the country as the most corrupt nation in the world after Bangladesh and sometimes Haiti. It was the devastating incidence of all these reported cases of corruption that moved the researcher to investigate the impact of corruption on fiscal policy management.
1.2 STATEMENT OF THE PROBLEM
The increasing wave of corruption and its devastating impact on national economies have become a global problem so much so that some World Bank researchers have embarked on the study of this problem in some developed countries of the world. Hence, the current researcher’s interest is to do a similar research here in Nigeria to find out the extent to which corruption in the fiscal policy management can affect Government expenditure, deficit financing and Tax revenue.
The choice to study the impact that corruption in the fiscal policy management has on Government expenditure, deficit financing is predicated on the fact the incidence of Corruption is frequently reported in these areas in Nigeria. Also, the researcher became interested in this topic because Corruption in fiscal policy management seems to reduce the funds budgeted to be spent on the basic needs. There are a lot of reported cases of abandoned projects. Again there is low contribution of tax revenue to the Government revenue. All these situations compelled the researcher to investigate the extent that corruption affects fiscal policy management.
Besides, the recent wave of corrupt practices noticed amongst the political office holders in Nigeria has had a negative impact on the people of the country. These corrupt practices are written in our dailies and are always reported on the television or sometimes we hear of them through radio announcements. Hence, the researcher resolved to find out, through a thorough investigative research, the actual impact of corruption on the fiscal policy management in Nigeria.
1.3 RESEARCH QUESTIONS
(1) To what extent does Corruption affect patterns of Government expenditure? (2) To what extent does Corruption affect deficit financing in Nigeria?
(3) To what extent does Corruption affect Tax revenue of the government 1n
Nigeria?
1.4 OBJECTIVES OF THE STUDY
This study intends to investigate the impact of Corruption on fiscal policy management in Nigeria. Specifically the study tends to:
1. Determine the impact of corruption on the patterns of budgeted expenditure.
2. Find out the impact of corruption on deficit financing
3. Find out the impact of corruption on the tax revenue in Nigeria
1.5 HYPOTHESES
H,: Corruption in the fiscal policy management does not have any significant effect on the patterns of Government Expenditure.
H,: Corruption does not significantly affect deficit financing in Nigeria
H,: There is no significant relationship between Corruption Perception Index and
Tax Revenue.
1.6 SIGNIFICANCE OF THE STUDY
The result of this study will help to improve the implementation of fiscal policy. The product of this research work will serve as a guide on budgetary allocations to the social sector. It will also enable the management of budgetary allocations to ensure that the budgeted amounts are really spent as planned. This research work will also be helpful to university lecturers, public finance researchers, and students of Accountancy, Banking and Finance, Public Administration, Business Administration, and Economics.
1.7 SCOPE OF THE STUDY
This study covers the impact of Corruption on fiscal policy management in Nigeria especially as it pertains to patterns of government expenditure, and deficit financing. Also, the study covers the impact of Corruption on tax revenue.
1.8 LIMITATIONS OF THE STUDY
This research work was limited by the operational disruptions in some of the major sources of relevant research material as exemplified in the protracted closure of CBN Library between January 2006 and March 2008. It was also limited by the temporary closure of the African Institute for Applied Economics library, following the exit of the Librarian who joined the FCMB.
1.9 DEFINITION OF TERMS
Allocate: To designate for a special purpose Set apart.
Embezzle: To take (money or property) for one’s own use in violation of a trust.
Squander: To spend wastefully or extravagantly.
Deficit Financing: Deficit financing occurs when a government deliberately allows expenditure to exceed revenue.
Debt: This is an obligation to pay money to another individual or institution now or at some future date.
Per Capita Income: This refers to the income of each person in an economy.
Rent: In economics, rent is the excess payment to the owner of a factor of production over the amount needed to keep the factor in its present employment.
Fiscal Policy: Government policy regarding taxation and spending.
Mismanagement: This refers to bad or improper management.
Tax Evasion: Implies avoiding payment of tax.
Fiscal Operations: This refers to government’s financial transactions involving collection, spending and borrowing funds for a given period.
Tax Avoidance: Means not paying completely what one is supposed to pay as tax.
Rent Seeking: is derived from economic concept ‘rents’ which implied excess earnings above necessary costs.
Bribery: refers to money paid or received in a corrupt relationship. Embezzlement: refers to theft of money that is entrusted in your case. Fraud: Implies manipulating a situation or circumstance for a private gain.
Corruption: It is defined to include bribery, fraud and other related offences.
This material content is developed to serve as a GUIDE for students to conduct academic research
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